Thousands of Islamic State insurgents spread over vast captured territories in Iraq and Syria have turned into a dangerously tough military fighting machine with a strong leadership structure that becomes more powerful every day and threatens U.S. allies in the region, The New York Times reported.

The terror group, also known as ISIS, is well-trained in terrorist techniques and well-organized with effective middle-aged managers overseeing departments that include finance, arms, local government, military operations and recruitment, according to documents seized by Iraqi military and U.S. intelligence officials.

The group's leader, Abu Bakr al-Baghdadi, the self-described leader of all Muslims, launched the al-Qaida offshoot while sitting in the Camp Bucca detention center a decade ago, handpicking his top officers from among the prisoners he befriended, the Times said.

Baghdadi chose men with military background, mostly former officers with years of fighting experience serving in Iraqi dictator Saddam Hussein’s once highly-regarded army, including Fadel al-Hayali, an ex-lieutenant colonel, and Adnan al-Sweidawi, a former lieutenant colonel who heads ISIS’s military council, the Times said.

Combining military know-how with well-planned terror tactics learned from years of fighting experience against American forces, ISIS has had a series of battlefield successes in eastern Syria and northern Iraq. It is, in effect, "a hybrid of terrorists and army," the newspaper said.

"These guys know the terrorism business inside and out, and they are the ones who survived aggressive counterterrorism campaigns during the surge," a U.S. intelligence official, referring to the increase in American troops in Iraq in 2007, told the Times. "They didn’t survive by being incompetent." The official wasn't identified by the newspaper.

Although the Sunni militants had launched their terror campaign in Syria, they eventually overran swaths of land in Iraq, ruled by Shiite Muslims who were unwilling to share power with the Sunnis, and in June captured Mosul, Iraq’s second largest city.

After the Iraqi army quickly folded leaving military equipment behind they had been given by the United States, Baghdadi declared a caliphate, an Islamic state, in the strife-torn region with strict Taliban-like rules, the Times reported.

American officials say ISIS fights more like an army than other insurgent forces, while holding captured territories and coordinating military operations across large areas. They also receive help from other Sunni groups, such as disenfranchised members of Saddam’s former Baath Party hoping to regain their former status.

Baghdadi’s deputies include 12 walis, or local rulers; a three-man war cabinet, and eight other superiors who manage portfolios like finance, prisoners and recruitment, according to the Times.

ISIS military operations are carried out by a network of regional commanders who have their own subordinates but are allowed to make their own decision in the field. But there is a special "drop time" when they speak to the terror’ group’s leaders.

In a bid to turn ISIS into a future global threat, the terror organization has recruited hundreds of fighters from the United States and Europe, including many from Britain. One group of foreign fighters is led by an ethnic Chechen who goes by the name Omar al-Shishani.

"In the terrorism game, these guys are at the center of a near perfect storm of factors," the American official told the Times.